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Honda: Corporate Rap Sheet

Honda

By Philip Mattera

Honda Motor was one of the great entrepreneurial success stories of post-war Japan. The company grew from a modest operation making engines for motorizing bicycles, into the world's leading motorcycle producer, and then into one of the most aggressive automakers. The company made major innovations in engine design—including ones that drastically cut polluting emissions--and played a leading role in opening the huge North American market to Japanese producers.

Honda became so firmly entrenched in the United States—from which it came to receive more than twice the revenue from Japan--that its operations there became regarded by many as a U.S. company. Honda is now battling with Toyota for market leadership in hybrids and other highly fuel-efficient cars. While generally acting as a progressive force in the environmental arena, Honda has been less enlightened in its policy toward the collective bargaining rights of its employees. Its reputation has also been tarnished by allegations that it underreported accidents and injuries.

Environment and Product Safety

As far back as the 1960s, Honda engineers were preoccupied with the issue of automobile emissions. When the U.S. Clean Air Act of 1970 made emission control an imperative, Honda approached the problem differently than other automakers. Instead of relying on catalytic converters to treat the hydrocarbons and carbon monoxide emissions, Honda sought to reduce pollutants at the source. It developed an auxiliary combustion chamber in which the ratio of air to fuel was low, while the ratio was raised much higher than normal in the main chamber. The system, known as Compound Vortex Controlled Combustion, or CVCC, was introduced in the early 1970s, and was the first to meet the standards of the Clean Air Act.

Honda continued to increase engine efficiency, and in 1991 announced that its 1992 Civic VX would receive a fuel-efficiency rating of an astounding 55 miles per gallon (mpg) for highway driving and 48 mpg for city driving. The company also displayed a prototype of a two-seat passenger car that could get 100 mpg.

Honda diverged from its competitors in declining to oppose stricter fuel-economy and emissions standards in the United States. Even though the company gave in to pressure to begin producing SUVs and minivans in the 1990s, it argued in favor of stricter standards for those types of vehicles.

To compete with Toyota’s popular Prius hybrid, Honda initially focused on developing hydrogen-powered fuel-cell vehicles such as the FCX Clarity--even though the infrastructure for such cars was not yet available. It then developed its own line of hybrids, which it expanded in 2009 with the introduction of its Insight in the U.S. market. It also announced plans for an all-electric vehicle.

The company’s environmental record is not completely clean. In 1998 Honda agreed to pay up to $267 million to settle U.S. government allegations that it programmed millions of its cars to ignore spark-plug failures that could result in much higher emission levels. The company paid a civil fine of $12.6 million and $4.5 million to fund environmental projects, while spending up to $250 million to serve and repair the vehicles involved.

In November 2014 the U.S. National Highway Traffic Safety Administration announced that it was investigating whether Honda failed to report accidents relating to rupturing airbags. The company later said it would replace all potentially defective airbags throughout the United States. And subsequent to that, the company announced a recall of nearly 5 million vehicles with defective airbags sold outside the United States.

The company also admitted that it had grossly underreported the number of deaths and injury claims linked to possible defects in its vehicles. In January 2015 NHTSA fined Honda $70 million for that misconduct.

Labor

In the early years of the company, when workers were virtually being pulled in off the street to increase production, founder Soichiro Honda ran the factory with an iron fist. He is even reputed to have "motivated" slow-learners by assaulting them with a wrench.

It is thus not surprising that in 1953 Honda's workers formed a union. Company acceptance of collective bargaining paid off a couple of years later when Honda faced severe financial difficulties. To help the company over the hurdle, the union called on members to relinquish days off and to work long hours.

The honeymoon was not permanent. In 1957 a dispute over wages led to a strike and later a lockout, which some workers resisted by occupying the roof of the company's headquarters. Honda responded by firing several union leaders, but this action was later overturned in court. Since then the company has enjoyed relatively harmonious relations with the All Honda Workers' Union, which is affiliated with the Japan Council of the International Metalworkers' Federation.

Honda imported a cooperative (but non-union) style of employee relations to the United States in 1979 when it began producing motorcycles, and then automobiles, in Ohio. The company deliberately chose a rural area where it could attract employees who had not previously worked in auto plants. This made it easier to engender the esprit de corps and cooperative environment (everyone was called an associate) thought to be necessary for efficient operation.

The United Auto Workers targeted the Ohio facility for organizing, and the union won a battle over the right of UAW supporters to wear union hats and buttons along with their Honda uniforms. The company claimed to be neutral about unionization, but the UAW charged that management had sponsored an anti-union group and otherwise attempted to discourage support for the UAW. An election scheduled for 1985 was postponed because of these charges, which were made to the National Labor Relations Board. After the NLRB dismissed the charges, the UAW decided to withdraw its call for an election.

Honda also faced charges of discriminating against women and blacks in its hiring practices. In 1988 the company agreed to pay $6 million to settle a discrimination suit brought by a group of 370 people who said they had been turned down for jobs because of race and/or sex.

In 1999 the Teamsters union launched an organizing drive at Honda’s Ohio operations, but soon announced that it was delaying plans to seek a representation election. The UAW continued to monitor conditions in those plants, and in 2002 the union publicly criticized the company over what it said was a high rate of worker injuries.

In 1999 the company announced plans for a plant in Alabama that has remained non-union. In 2009 Honda slashed output at the facility amid an industry downturn; workers were forced to take unpaid leave and were offered buyouts. In 2011, however, Honda announced an $80 million-plus expansion and increase in capacity but only a modest increase in jobs.

After Honda’s 2006 announcement of a new assembly plant in southern Indiana, the UAW protested the company’s decision to accept applications only from workers living in 20 surrounding counties. The union charged that this policy excluded thousands of laid-off autoworkers living in the traditional automotive centers farther to the north. A 2008 article by Roger Bybee in Dollars & Sense pointed out that the policy also ensured that there would be little racial diversity at the plant—which received more than $140 million in subsidies—given that the population in the hiring area is overwhelmingly white.

In 2009 Honda followed the lead of other Japanese automakers in offering buyouts to workers at its U.S. operations.

In Britain, Honda declined voluntary recognition of the Amalgamated Engineering and Electrical Union, but in December 2001 the union won an overwhelming victory in a representation election among some 4,000 workers at the company’s plant in Swindon. Members of the union, now part of Unite, voted in 2009 to accept temporary pay cuts to help save jobs amid the economic downturn.

Honda was also resistant when workers at its subsidiary, Honda Motor Cycle & Scooter India, began to organize a union in 2005. The company fired several union leaders, suspended 50 activists, and initiated a lockout. In the following weeks, hundreds of workers clashed with police, resulting in many injuries. Finally, the company agreed to recognize the union and reinstate the dismissed and suspended workers.

In May 2010 Honda became one of the prime targets of a labor uprising at various foreign-owned factories in China. Striking workers at Honda’s transmission rejected the company’s offer of a 25 percent wage increase and ended up winning a hike of more than 30 percent. This inspired walkouts at other Chinese Honda plants.

Racial Discrimination

A 2004 Consumer Federation of America report showed that American Honda Finance Corporation tended to charge higher finance markup charges to African-American borrowers than to white customers. In 2005 the company and several banks settled a related lawsuit by agreeing to limit markups, and to offer loans with no markups to up to 2.4 million minority customers.

In July 2015 the U.S. Justice Department announced that Honda would pay $24 million in compensation to settle allegations that the company engaged in a pattern of discrimination against African-American, Hispanic and Asian/Pacific Islander borrowers in auto lending.

Bribery

A 1993 exposé in the New York Timesrevealed that U.S. Honda dealers were routinely pressured to give expensive gifts to get their full complement of cars to sell. The company quickly fired the executives said to be involved. Many of these executives, including a senior vice president, later pleaded guilty to bribery-related charges.

Subsidies

In 1999 Alabama prevailed over several other states to land Honda’s first U.S. auto assembly plant outside Ohio. The Japanese company selected a site in Lincoln, a city in the central part of the state east of Birmingham, for the 1,200-worker facility after it was offered a $158 million subsidy package consisting of about $102 million in infrastructure and training outlays, and $56 million in tax breaks. In 2002 Honda received additional subsidies worth about $90 million in connection with a plan to double its output of minivans and engines in Lincoln. In 2006 Honda received a package worth an estimated $141 million in subsidies for a plant it agreed to build in Indiana.